A New York Operator's Trail of Blood, Bankruptcy, and Brazilian Diamonds

The entrance to the 110-year-old brownstone at 2 East 12th Street, two blocks south of Union Square, isn't particularly dramatic or imposing. You have to step down to reach the front door. There's no doorman to wait on you.

Looking at it, you wouldn't imagine that the basement apartment there was at the center of a bitter court fight that ranged from the West 47th Street Diamond District deep into the Amazon jungle, and involved smuggling, bribery, corruption, a $20 billion corporation, Stone Age Indians, and a massacre.

Longtime New York diamond merchant Marco Kalisch and his wife, Mayra, owned the apartment, having lovingly restored it after combining it with the two adjacent units. They had a nice life—at least until Kalisch and his Brazilian partners tried to corner the market on rough diamonds being illegally mined on an Indian reservation in the Amazon.

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Garimpeiros at work, photographed from a federal police helicopter in 2004.

"The story told by Marco [Kalisch] could be the basis of a screenplay," a U.S. bankruptcy judge noted in his surprisingly novelistic description of the case that was almost completely ignored by the media. "The background [swirls] with references to shady dealings and long journeys into remote areas of the Amazon jungle, describes an apparently illegal conspiracy to obtain rough diamonds from . . . Indians in Brazil and import those diamonds into the United States for ultimate sale in the diamond market of Antwerp."

That wild scheme, actually successful for a short time, ultimately blew up. And in the end, what the Americans involved in it were left to fight over was the basement apartment on East 12th Street—so far away from where the story starts, thousands of miles south, deep in inaccessible jungle.

The 1,300-member Cinta Larga tribe, whose name means "Wide Belt," lives on a 6.7-million-acre Brazilian reservation of dense jungle, limited roads, and almost impassable rivers. The land, about 2,100 miles northwest of Rio de Janeiro, is reachable only via 100 miles of poorly maintained dirt roads. Inside the reserve, travel is limited largely to narrow foot trails and the river.

The first extensively recorded encounter with white Westerners came during Theodore Roosevelt's historic expedition down the so-called River of Doubt, named for its extreme and dangerous conditions.

When Roosevelt and the Brazilian explorer Cândido Rondon, for whom the state is named, encountered them in 1914, the Cinta Larga had never seen a white man before. They were still living in the Stone Age, isolated by the river, and hadn't even thought to build boats.

War for the Cinta Larga was a cultural obsession. The tribe decapitated and eviscerated their enemy's dead and grilled the meat over an open fire before bringing it home for their wives to slice, cook with water, and consume.

Over the years, the tribe began to encounter outsiders more frequently—often, men who entered the forest to gather latex from rubber trees. In 1928, a gang of rubber-tappers slaughtered a Cinta Larga village. Battles between Indians, tappers, and mineral miners continued for decades after that. The violence and periodic epidemics the tribe blamed on outsiders took a toll.

In 1969, the tribe was about 2,500 strong. But by 1981, their numbers had dwindled to 500. From that low, the tribe's numbers increased to about 1,300 in 2003. And while some Cinta Larga still insist on traditional garb, many of their members have learned Portuguese, dress in modern clothing, and drive pickup trucks.

While diamonds had been found on the reserve from time to time over the decades, the major rush for the mother lode began in 1999, when a miner came out of the jungle with a gem the size of a baby's fist.

Brazilian rough diamonds are alluvial, which means they are close to the surface—most often found in riverbeds. All you need to find them is a good spot and a pan that sifts the river bottom.

After the 1999 discovery, thousands of subsistence-level prospectors—known as garimpeiros—descended like locusts onto the reservation.

By 2002, there were some 3,000 garimpeiros mining in the reserve. The government expelled them, but they kept returning, which created extreme tension with the Cinta Larga and led to at least 70 deaths on both sides.

Finally, the government set up roadblocks to prevent miners from getting to the reserve, but even that didn't work.

Brazilian authorities have estimated that the Cinta Larga lands contain the largest diamond reserves in South America. Some $2 billion in diamonds have been mined on the reserve since 1999. Another estimate says the country loses up to $800 million a year from diamond smuggling.

In 2003, as Marco Kalisch hatched a scheme to harvest diamonds from the reservation, the Cinta Larga were still dealing with the protracted struggle to control the steady theft of its vast diamond deposits.

Kalisch, then in his late fifties, had been running a diamond-importing business since 1983 out of a stall in the West 47th Street Diamond District.

There, on a block that thrums with activity, you'll find dozens of cramped stalls in one storefront after another, with dealers haggling, prodding, and beseeching each other in a dozen languages, cell phones surgically connected to their ears.

Kalisch was well-educated. He had earned an undergraduate degree from Lehigh University, had studied in the Hague in the Netherlands, and had technical training at the Gemological Institute of America. He was a longtime member of the New York Diamond Dealers Club.